A New Medicare Era

The new Medicare law signed by President Bush on Dec. 8, 2003, includes a number of reforms that affect Medicare beneficiaries and the home care providers who serve them. The following highlights of portions of the law from the American Association for Homecare's Asela Cuervo, senior vice president, and Ann Howard, director of federal policy, will give you the basics, as will AAHomecare's accompanying summary of certain provisions. The summary chart is available in its entirety to association members at www.aahomecare.org. To view the entire law as it is written (678 pages), visit http//thomas.loc.gov.

The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) has two primary purposes: to provide prescription drug coverage for Medicare beneficiaries and to encourage as many beneficiaries as possible to consider an extended array of benefits offered through new private “Medicare Advantage” plans. Durable medical equipment companies need to position themselves to participate in these plans as the new Medicare era unfolds.

The MMA contains significant changes to Medicare reimbursement for home care companies that provide durable medical equipment prosthetics, orthotics and supplies (DMEPOS) items and services. A freeze in the Consumer Price Index update for these items is already in place, with reimbursement rates frozen at what they were on Dec. 31, 2003.

Likewise, there has been a reduction in the Average Wholesale Price for inhalation drugs. The MMA provides for a reduction in reimbursement for these drugs of as much as 15 percent from last year's reimbursement, or to 80 percent of AWP. Most drugs, however, will be reimbursed at 85 percent of AWP for 2004.

In 2005, reimbursement for inhalation drugs shifts to a new reimbursement model. The MMA calls for inhalation drugs to be reimbursed at 106 percent of the manufacturers' Average Sales Price, but a number of questions remain with respect to the way in which CMS will implement ASP. The statute describes ASP as an amount that is net of any discounts, rebates or other incentives. This suggests that Congress' intent was to approximate the average acquisition cost for these drugs. AAHomecare will be meeting with CMS to find out what their intent is for moving forward on implementing the regulation.